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Leading a Venture within a Corporation

Finally, after many months of making a business case to the C suite, you get the approval to fund a transformational project across two businesses or with a major partner. You’re ready to execute. So how is this different than leading any other innovation project? Don’t we just follow the business stage and project management process? Not so fast – there’s more to it.

Recognize the probability of commercial success of internal ventures is very low. I’ve had the pleasure of experiencing the highs of success, and lows of venture termination. (Note: I dislike using the word failure since you can’t expect a home run from every high risk endeavor). However there are a few best practices you can follow that can mitigate the risk

When starting a new venture, there are several factors that need to be considered

Managing Stakeholders

Venture Leadership

Venture Team Leaders

Governance

Management Process

Risk Management

Budget

Reward and Recognition

Venture Leader

When choosing a venture leader, you need to take these skill sets under consideration. First, unless they have the right skill set, you should stay away from choosing the entrepreneur, scientist, or marketer who started the idea and drove it through approval. Also, this isn’t a development assignment for one of your high-potential people.

The venture leader position requires years of experience leading a small business, product line, or function, and certainly someone who has commercialized new products. You also need someone who has demonstrated leadership skills with people and can confidently communicate to senior management, partners and customers. This person will be experiencing some difficult challenges, and will need to maneuver through the highs and lows of a venture.

In most cases, the venture leader needs to understand technology, market, operations, finance and possess overall good business skills. In most cases this person has the potential to be a VP or Director of a business or a function.

Managing Stakeholders

Think of the stakeholders as your venture capitalists in a startup company. They’re usually C suite executives, Senior VPs, or the CEO. They’re going out on a limb to support a venture that has less than a 20% chance of success at the beginning and may not have a payoff for years to come. They’re funding this venture with expense and capital that may be outside the normal P&L process. However, they’re depending on the venture to deliver the home run that’s needed to drive significant top line revenue growth for the corporation. It’s up to the venture leader to keep them informed on a regular basis on the progress, challenges and risks associated with venture. This requires informal one on one meetings at least once a month. In my experience, mismanaging stakeholder expectations can be one of the biggest failure modes of a venture. In fact, many stakeholders would rather deal with the bad news than being fed an overly optimistic progress report. Remember, they have the authority and experience to give you additional support.

Venture Leadership Team

The venture leader works with functional and/or business leaders to pick the leadership team. Again, these are not development assignments. The venture leaders need a seasoned multi-functional team that can maneuver the rough waters ahead. At a minimum, leaders from technology, marketing, finance and operations are needed to represent the key functions. Recognize it’s not too early to identify the risks associated with the plan to commercialization. These functional leaders are invaluable and can easily sense the challenges to come. Early detection of these challenges reduces the risk

Governance

Like any major project, you need to have a Decision Board that governs the venture through its progress in the commercialization process. In this case, given the magnitude of the funding involved, the Decision Board should have senior Business and Functional leaders that have both Budget, Resources and “Skin in the Game”. It’s ok to have one or two advisors, but in my experience they don’t get a deciding vote on the direction of the venture.

Governance does not mean judging. It means making decisions, directing the team and finding ways to help the venture succeed. Sure there will be some tough calls like redirecting the venture team when they haven’t addressed the critical risks, but the team will appreciate their guidance. But – no surprises. It’s up to the venture leader and venture team leaders to keep the Decision Board members informed on progress and issues. That means informal one on one meetings. Don’t wait until the formal review before you break the bad or good news. Don’t be afraid to ask the Decision Board for help. Be specific. Their position can open doors internally, with partners and customers.

Management Process

As I mentioned before, managing a venture is more than following a stage gate process. The first few stages may be one or two years. I can assure you, no one is going to give you a budget for that long without regular updates. In my experience, above and beyond the stage gate process, the venture needs to develop a project plan with critical milestones. These milestones are the critical accomplishments that need to occur in order to demonstrate progress. They can be technical, marketing, business, legal, operational, etc. It’s important to update the Decision Board on the progress you’ve made toward major milestones. I suggest a formal review at least once quarter. When appropriate, try to synchronize these reviews with a stage gate review. I also highly recommend functional reviews from time to time during the calendar year. Don’t be afraid to stand up in front of your peers and get their feedback. It can be invaluable.

Risk Management

Managing a Venture is about managing risk and uncertainties. I recommend listing the key risks in the venture – or leading the team through a future failure mode analysis. In other words, if this venture was going to fail, what are the top 5 failure modes? After listing the key risks and potential failure modes, develop a risk mitigation plan. I.e., what actions will the venture team take to reduce the risk? Maybe this means developing a contingency plan or starting a small program. Remember, risks may be technical, partner, value chain, legal, market, regulatory, etc. I suggest that you actively manage the key risks. Keep a stoplight chart. Share it with team and the Decision Board. Don’t let venture risks be the “elephant in the room” that is not discussed. Deal with it.

Budget

Where does the funding come from? Is it corporate, business or both? The answer is everyone needs skin in the game. The corporation may provide seed money or resources to get started, but ultimately the businesses or partners that will benefit need to provide resources and / or budget. I know this is very challenging with a tight P&L target, but this is where your stakeholders step up to the plate and make it happen. Ultimately, if the venture becomes successful and launches a breakthrough product, the funding will not be a problem.

Reward and Recognition

By all means, look for ways to motivate and reward the team. Use whatever tools you have in your business. E.g. dinner for two, pizza lunches, team picnics, happy hours, accomplishment awards. Keep it simple, and immediate. I have experimented with milestone bonuses, Phantom stock, special compensation and other monetary rewards. Although they were nice to receive, they did not necessarily add extra motivation to the team. In fact, these rewards are complex to administer within the corporate bureaucracy and can create some resentment between team members or employees outside the venture. If you work on building team trust and simple / immediate recognition, it will go a long way in motivating the team.

Leading and managing internal ventures are not for the faint of heart. They can be the most frustrating, and most rewarding experiences in your career. It like anything else in life – learn from your experiences and get better at playing the game.